Life insurers are increasingly challenged to reduce underwriting expenses and increase underwriting speed and decision making, while maintaining superior mortality protection and promoting fairness in risk selection. Faced with these mounting pressures, some insurers modify underwriting procedures and practices without fully understanding the potential long term impacts of changes. For some insurers, concerns regarding immediate underwriting costs and simplification of underwriting procedures are paramount. Future mortality costs receive less emphasis since those costs are often difficult to predict with precision, and may be mitigated through reinsurance arrangements, inflation, and other factors.
Increased administrative costs resulting from enhanced privacy and security concerns also affect insurers' choices of underwriting requirements. These measures also influence administrative work flow and the manner of dealing with insurance consumers.
Insurers can evaluate the impacts of changes in underwriting procedures and requirements for existing or proposed insurance products by conducting extensive studies and analyses of relevant published data and of their own empirical data. However, such studies are time consuming and laborious. There exists a need for an automated, technologically-based approach to evaluating existing underwriting requirements, and for quickly and cost effectively evaluating the impacts attendant to changes in such requirements.
One embodiment of the present invention provides a computer method for evaluating expected changes in mortality of an insurable class in response to a change in underwriting requirements. The method comprise the steps of storing data relating to protective values of a plurality of underwriting requirements; determining an expected mortality for the insurable class using a first set of underwriting requirements; changing one or more of the underwriting requirements of the first set of underwriting requirements; and redetermining the expected mortality for the insurable class using the changed set of underwriting requirements and the stored data relating to protective values. The embodiment may further comprise the step of conducting a protective value study to identify the data relating to protective values of the plurality of underwriting requirements. This and other embodiments may also further include the steps of determining prevalence of one or more impairments in a population, and/or identifying one or more impairments uncovered by at least one of the plurality of underwriting requirements. In the latter case, the method may further comprise the step of determining one or more causes of death eliminated by screening for impairments uncovered by the underwriting requirements.
Certain embodiments may further include the steps of determining total causes of death eliminated by at least one of the plurality of underwriting requirements, and comparing the expected causes of death for the insurable class with causes of death for the general population. These or other embodiments may further comprise the step of calculating mortality savings for at least one of the underwriting requirements. The mortality savings calculated may be stored by age, gender and smoking status. The step of calculating mortality savings may further comprise the step of calculating unique mortality savings, shared mortality savings and total mortality savings for the underwriting requirements.
Another embodiment of the invention comprises a computerized system for evaluating expected changes in mortality of an insurable class in response to a change in underwriting requirements. The subject system may comprise existing computer hardware programmed to perform the steps set forth above in connection with the embodiments of the aforementioned method.
Another embodiment of the invention comprises a computer method of designing a life insurance product. This method comprises the steps of storing data relating to protective values of a plurality of underwriting requirements; calculating a unique mortality savings, a shared mortality savings and/or total mortality savings for at least one of the underwriting requirements; determining an expected mortality for an insurable class using a first set of underwriting requirements; changing one or more of the underwriting requirements of the first step; redetermining the expected mortality for the insurable class using the changed set of requirements; and, using at least one of the determined expected mortality and the redetermined expected mortality, designing a life insurance product. This method may operate iteratively to consider a plurality of sets of underwriting requirements in designing the product. The method may be operated so as to achieve a predetermined mortality rate for the insurable class, or to achieve some other targeted objective. The method may further comprise the steps of conducting a protective value study to identify data relating to protective values of the underwriting requirements, and/or storing either unique, shared or total mortality savings for the underwriting requirements by age, gender and smoking status.
One embodiment of the subject method may further comprise the steps of determining prevalence of one or more impairments in a population, and identifying one or more impairments uncovered by at least one of the underwriting requirements. This or other embodiments may further comprise the steps of determining one or more causes of death eliminated by screening for one or more impairments uncovered by the underwriting requirements, and determining total causes of death eliminated by a first set of underwriting requirements and a changed set of underwriting requirements. Expected causes of death for the insurable class may further be compared with causes of death for a general population.
Yet another embodiment of the subject invention comprises an automated system for designing a life insurance product. The automated system comprises known computer hardware programmed to accomplish the steps of the aforementioned methods.
Additional features and advantages of the system and method will become apparent to those skilled in the art upon consideration of the following detailed description of an illustrative embodiment which exemplifies the best mode of carrying out the system and method, as presently conceived.
The exemplifications set out herein illustrate embodiments of the system and method, and such exemplifications are not intended to be construed as limiting the scope of the invention in any manner.